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Debt Consolidation Beware!

Reviewing: Money Management International Debt Consolidation/Counseling  |  Rating:
sevp By sevp on
Badge: Publisher | Level: 8 | Finances Expertise:

I had a relative that recently tried debt consolidation. He wasn't too far into debt where he couldn't pay his bills, but he was getting nowhere fast trying to pay down credit cards. He tried debt counseling/consolidation with a company called Money Management International or MMI.

He told me that after calling MMI, they claimed they could reduce the interest rate on a lot of his cards by almost 1/2 in some cases. They were only going to charge $5 per account. I went over this with him (I'm protective of my relatives!) by combing through their website and looking at the fine print.

It seemed like a legitimate business that wasn't out to rake to for all your cash. You could even manipulate the amount of money that goes to each account, so it isn't in total control of MMI. The biggest stipulation is that MMI requires withdrawal of their payments from a checking account. So if you don't have one, better get one!

About three months later my relative said that he was satisfied with the program and was surprised by some of the details. One credit card's interest was cut from 19% to 9%. I didn't see all his bills but he was able to determine how much or little was paying off the cards. MMI told him that he needs to update the status of his bills online every few months so that he doesn't get shafted by the companies. They even said that if you pay down one bill they can automatically direct those funds to the next lowest bill.

The biggest catch, however, came six months after starting with the company. My relative tried to apply for credit at a car dealership. When they reviewed his credit report, it showed that all the bills he had were in debt consolidation. Instead of everything being lumped under MMI, all the bills were still separated and showing under debt management! This could be a hindrance if people see that for seven years and don't understand the difference between being in the hole and managing your debt.

So what I learned from him is that if you are seriously behind in payments or don't like having your head just above water, debt management and counseling with MMI is the way to go. If you just want to reduce your "outgoing" debt by lowering credit card interests through MMI, it may haunt you on your credit report! And MMI doesn't mention this on their site.